Below is a letter (Source from http://forums.digitalpoint.com/showthread.php?t=948864&page=3 accessed on 19 Aug 2009) regarding paypal conversion process. Really wonder if I should choose Paypal or choose my own credit card for the conversion options. A lot of people actually prefer use their own Credit Card. So I also chose my own CC.

The exchange rate will be calculated anytime funds are converted from one currency to another. The rate PayPal presents includes a small risk factor as well as a currency conversion fee.https://www.paypal.com/useragreement or copy and paste the entire link into the address bar.

The rate will be figured at the time of the conversion from one currency to another. For example:

· If funds are transferred from one balance to another in an account, the exchange rate will be calculated and presented during the conversion

· If a payment is sent in Pounds Sterling using a credit card denominated in U.S. Dollars, the exchange rate will be calculated in the Send Money flow

· If a payment is sent in Euros and the receiver accepts the payment and converts it to U.S. Dollars, the exchange rate will be calculated before the total amount is credited to the account balance. PayPal is not a currency dealer and therefore must purchase foreign currencies from its bank. PayPal receives a quoted wholesale rate from
its bank [twice a day], and adds a 2.5% spread above this rate to determine the retail foreign exchange rate that is applied to customers who make a transaction that involves a currency conversion (such as a payment in Euros from a U.S. dollar balance), or a withdrawal of dollars by a U.K. user to his local bank account (the dollars must be converted
to pounds sterling before withdrawal).

The 2.5% spread that PayPal charges is competitive with most multi-currency credit card transactions, in which Visa or MasterCard charge a 1% spread above their wholesale exchange rate, and the card-issuing bank typically charges an additional spread of 1-3%. Visa and MasterCard benefit from a lower wholesale rate than PayPal, but PayPal seeks to keep its foreign exchange rates competitive with credit card transactions and other on-line payment service providers such as Western Union. Because PayPal does not charge a high fixed fee for sending international payments, the total cost of sending an international payment through PayPal is still lower than many international multi-currency bank transfers.

Please keep in mind that some of the published rates only apply to large transactions that are valued at U.S. $1,000,000.00 or more. A more applicable comparison for consumers is the exchange rates quoted at airports or other consumer currency exchange shops.  PayPal allows its customers to transfer any amount that is U.S. $25.00 or more, with the same conversion rate, to the bank account and the funds are automatically converted into the local currency for approved bank accounts. For more detailed information on the exchange rate click

If you click the link “Conversion options” on the Review Your Payment page, you will get a page that explains that you have two options for being charged for a currency conversion. The two options are:

· The PayPal currency conversion process
· The MasterCard and Visa currency conversion process
You can select your option by choosing one of the following:

· Use PayPal’s conversion process to complete my transaction using my card’s currency.
Both the original transaction currency and the converted amount that I will be charged are disclosed for my convenience. I understand that MasterCard and Visa have a currency conversion process. I have chosen not to use the MasterCard and Visa currency conversion process, and I will have no recourse against MasterCard and Visa with respect to
any matter related to this conversion.
· Bill me in the currency listed on the seller’s invoice. I will not know which foreign exchange rate has been applied to this transaction until I receive my card statement from my card issuer. I acknowledge that by choosing this option, my card issuer will determine the foreign exchange rate to apply to this transaction, and that I will not be informed of the foreign exchange rate or any additional foreign exchange fees applied until I am billed by my card issuer. Once you make your selection, click “Submit.”

If you have any further questions, please feel free to contact us again.

Sincerely,
Arj
Consumer Support
PayPal, an eBay Company

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